The Economical Wave of AI: How Governments are Investing in the Future

Governments are scrambling to stay ahead of the AI tsunami, and for good reason. Like any other useful technology, AI presents a gigantic economic opportunity for governments worldwide. In fact, PricewaterhouseCoopers (PwC) has estimated that AI could contribute up to $15.7 trillion to the global economy by 2030—more than the current economic output of both China and India combined. PwC has also provided a breakdown of where this money is likely to come from, with approximately $6.6 trillion stemming from increased productivity and an additional $9.1 trillion expected from consumption-side effects.

The Opportunity AI Presents

Clearly, AI is poised to have a massive impact on the economy as a whole. As such, governments are looking to invest in ways that provide their citizens a leg-up in future economic endeavors. However, government officials are also focused on solving government-specific problems. One of the most intriguing benefits of AI in government is its potential to help overcome bureaucracy and regulation.

While one could argue that a government’s primary reason for existence is to uphold laws, many of these regulations can be labyrinthine—challenging for both average citizens and seasoned government workers alike. For instance, Singapore has developed the “Ask Jamie” virtual assistant. This AI tool is designed to assist citizens and businesses in navigating services offered by nearly 70 government agencies, utilizing both chat and voice functionalities to simplify processes for Singaporeans.

Regional Investment Strategies

Although AI is becoming a widely used tool, its implementation varies significantly based on region and local government. Below, we provide an overview of some key developments in government AI spending around the world.

China

• In July 2017, China’s State Council introduced the New Generation Artificial Intelligence Development Plan. However, exact spending figures related to this initiative have not been publicly disclosed.
• By 2022, it was reported that the Chinese government had created 2,107 guidance funds with a registered target size of $1.86 trillion. Nonetheless, by 2023, these funds had only raised approximately $940 billion.
• An interesting regional statistic comes from Shanghai, which announced a fund of around 100 billion yuan (about $14.6 billion) for developing the nation’s AI industry in 2018.

European Union

• The European Union has initiated the AI Innovation Strategy, a national plan for AI investment representing around €4 billion through 2027 dedicated specifically to generative AI.
• This strategy includes plans to develop “AI Factories” across the EU, combining supercomputing infrastructure and human resources to enhance AI application development.
• The Commission also aims to improve data availability through the creation of Common European Data Spaces for startups and innovation organizations.

United States

• The U.S. National AI R&D Strategic Plan, updated in 2023, outlines the federal government’s roadmap for AI research and development.
• In fiscal year 2022, federal government spending on AI reached $3.3 billion, a 2.5 times increase from 2017’s $1.3 billion.
• The overall U.S. Federal IT Budget for 2025 is projected to be $75.13 billion, heavily focusing on cybersecurity and AI.

Challenges and Barriers

While the advantages of investing in AI are evident, there are several challenges that governments must overcome both nationally and internationally. A major issue is the AI skills shortage prevalent in most countries. Many existing workers may be resistant to adopting new AI technologies. Although governments can support educational initiatives, they will need to address more specific challenges, including outdated legacy systems that do not integrate well with AI or machine learning.

Moreover, the high cost of developing AI infrastructure poses a significant barrier. A recent poll indicated that 55% of respondents viewed cost as the biggest obstacle to adopting AI tools. The escalating prices of necessary hardware create additional financial strain, making it increasingly difficult for some nations to implement these technologies swiftly.

In conclusion, as governments worldwide recognize the potential of AI to transform economies and streamline bureaucracies, they are making substantial investments. However, overcoming the inherent challenges will be critical to fully harnessing AI\’s capabilities for the benefit of their citizens. The next few years will be pivotal in defining how these investments shape our futures.